Gold under pressure ahead of Fed decision as Hawkish Monetary Policy backdrop persist
Today’s markets analysis on
Gold came under pressure on Tuesday ahead of tomorrow’s Federal Reserve interest rate decision. The metal continues to face a hawkish monetary policy backdrop. Markets are pricing in two interest rate hikes later this year. This outlook could keep bond yields supported, limiting gold’s appeal.
In addition to the Federal Reserve, the European Central Bank, the Bank of England and the Bank of Japan are expected to raise interest rates this year. This would reinforce a restrictive stance among major central banks. This outlook points to an elevated global yield backdrop that could continue to weigh on bullion, despite the recent retreat in yields and oil prices.
Hopes of a return to the diplomatic process in the Middle East pushed oil prices down this week, easing inflationary concerns to some extent and potentially softening the monetary policy outlook if the decline in energy prices is sustained. Such a shift could provide some relief for the metal and could lead to a recovery, supported by central banks’ ongoing gold purchases.
Zaid Barem / ymm
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